Magazine |
Surprise as employers’ NI rise goes ahead

The planned National Insurance rise for 2011, a highly controversial policy in the General Election campaign as the Conservatives had planned to reverse it, will go ahead.

The Government announced that ’the employee, employer and self-employed rates of National Insurance contributions will increase by 0.5% from April 2011 in addition to the 0.5% increase announced in 2008.’

Prior to the Budget, the Coalition Government had indicated that the rise would go ahead only for employees, not employers, so the final announcement represented a significant climb-down. However, there will be a change to the secondary threshold, which is the point at which employers start to pay Class 1 NICs. This is to be increased by £21 a week above indexation.

But the 1% rise for 2011 that had been planned by Labour’s Chancellor Alistair Darling was criticized by the Conservatives as a ‘tax on jobs’, with this phrase used by Conservative leader David Cameron in the televised election debates.

Chancellor George Osborne had better news elsewhere in his speech for employers, announcing NI relief for start-ups: ‘For the next three years anyone who sets up a new business outside London, the South East and the Eastern region will be exempt from up to £5,000 of employer National Insurance payments, for each of their first 10 employees hired,’ he said.

He also announced lower corporation tax, to be cut by one per cent to 27 pence in the pound by next year. ‘The year after we will cut it again by one per cent. And again the year after, and again the year after that. Four annual reductions in the rate of corporation tax that will take it down to just 24 per cent. It will give us the lowest rate of any major Western economy, one of the lowest rates in the G20, and the lowest rate this country has ever known,’ he told the House.

23/06/2010